Financial advisors need to do more to provide their clients with more tax-related education and professional advice to help clients reach their savings and retirement goals, according to a new report from Natixis Global Asset Management.
Specifically, 46% of the Canadian investors surveyed for the report indicated they aren’t having conversations with their advisor about tax-efficient investing while 27% said their advisor has failed to provide them with tax-planning strategies to meet their goals.
Advisors should take note as the survey found that 58% of Canadian investors would fire their advisor if another one could better advise them on the impact of taxes on their portfolios.
“The demand for tax planning advice is an area that financial advisors can and should be focusing on at a time when investors are scrutinizing the value of advice for the fees they are paying. Advisors can help guide investors to navigate tax laws that are complex and confusing,” says Abe Goenka, CEO of Natixis Global Management Canada, in a statement.
“Taxes can have a significant impact on investment returns,” he adds. “Our survey finds that the majority of Canadians are considering the tax implications of their investment decisions.”
Currently, investment income in Canada can be taxed higher than 50%, depending on an investor’s tax bracket and home province. Natixis’ research also shows that more than 5% of the annual taxes paid by 58% of investors are derived from investment returns.
“Advisors have a wide range of tools to provide investors with more tax-efficient investment strategies,” says Robert Handelman, vice president of tax and wealth at Natixis Global Asset Management Canada. “Although many advisors claim to implement these strategies, our survey shows that most advisors aren’t going beyond the tip of the iceberg, namely, maximizing use of tax-advantaged registered accounts.”
For example, 41% of Canadian investors surveyed said they have not received advice from their advisors on maximizing investments in registered accounts, such as RRSPs, RESPs, and TFSAs, while only 22% said their advisor has focused on the tax implications by the type of investment income earned.
Natixis surveyed 500 Canadian investors online about tax planning needs and strategies, including 329 who use some type of financial advice, in April.
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